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Market segmentation information
Market segmentation
You might think that if you try to appeal to everyone in the market you’ll
sell more of your product.
Not all people want the same thing and it’s usually best to give customers
exactly what they want if you can.
Think about products such as mulch and potting mix; or services such as
lawn mowing. In many cases it would be possible to target all customers
with the same product offering. However, even in these broadly generic
markets customers do exist with different needs and wants.
So, remember: Different people want different products. Tailor your
offerings to meet these different needs and wants. This is called market
segmentation
Segmentation is the process of breaking your total market into a number of
manageable and homogenous sub-markets or segments.
These segments will have unique customer characteristics. By focussing on
these you’ll be able to formulate specific and effective marketing strategies
to satisfy the needs and wants of your target customers. It’s useful to think
of a market segment as a group of customers with common needs or wants
Smart marketing
Segmentation is smart marketing. It allows you to select the segments of a
market you can compete in most effectively. It enables you to use your
resources to the greatest advantage as you can focus all your marketing
efforts where they will get the best returns.
Segmentation advantages
 Small companies can select segments where they can compete more
effectively.
 More efficient use of company resources.
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 The company can design products that more closely meet customer
needs.
 The company can allocate resources to individual segments with
priority given on the basis of the company’s marketing objectives.
 Advertising media can be used more effectively and communication
can be more tailored to the target market.
Segmentation disadvantages
 Economies of scale cannot be achieved as easily.
 Inventory costs are often increased.
 Advertising costs can be increased with the need to reach the various
target markets.
 Some segments are too small to be viable.
 Marketing costs are often increased with different marketing
programs needed to satisfy the various target markets.
Segmentation processes
To effectively segment a market it is important to know as much as possible
about the customers and about the market itself. This includes knowing:
 the needs and wants of customers
 their motivation to buy
 any unmet needs they may have.
Process to segmenting a market
Basically there is a three-step process to segmenting a market.
1
Identify the needs and wants of customers. In reality, all customers
differ in some way. The extent of these differences needs to be
examined in relation to their behavioural and buying patterns.
2
Identify the characteristics that distinguish market segments from
one another. To develop meaningful segments the customers must
differ from one another in some important way.
3
Estimate the market potential. Segments must be able to be
identified by measurable characteristics so that their potential value
as a target market can be estimated.
How might a wholesale nursery segment its market?
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 Firstly we need to identify the type of market. In the case of the
wholesale nursery there are two main segments:
o Consumer, eg retail nursery, nursery gate
o Business, eg landscape contractor, landscape designer
 Secondly we need to identify the bases for segmenting the market.
The bases a wholesaler might use for segmenting the market might
be:
o Distribution
o Plant quality specifications
 Naming and describing the market segments, identifying the bases for
segmentation might look like this:
o Retail outlets. Retailers are interested in the high quality of
individual plants. They expect coloured labels, point of sale
promotional material and clean pots. Some also expect you to
pre-price plants prior to delivery.
o Landscaping companies. Landscapers are looking for high
uniform quality over large batches of
plants, correct
labelling (but not on coloured labels) and a container that
allows them to plant quickly.
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